Privatization positive for UCPB – Moody’s

The privatization of United Coconut Planters Bank (UCPB) would be a positive development for the currently government-controlled bank, Moody’s Investor Service said.

“A successful privatization of UCPB will help the bank raise new equity capital to meet Basel III capital requirements, a credit positive,” the debt watcher said on Thursday.

Finance Secretary Carlos Dominguez 3rd last week said that UCPB’s privatization and recapitalization could proceed following the lifting of an order preventing the government’s sale of its 73.9-percent stake.

“Mr. Dominguez’s statement confirms the government’s commitment to UCPB’s privatization, which received strong market interest before the June 2015 restraining order halted the process,” Moody’s said.

Moody’s

The Supreme Court ruled five years ago that the government owned the majority of UCPB as the stake had been acquired using money from a levy charged to coconut farmers.

The then-ruling Aquino administration announced plans to privatize the bank but this was held up in 2015 after the high court stopped the government from utilizing the coco levy fund.

The restraining order was lifted earlier this month.

“[I]f a larger bank acquires UCPB, we expect that UCPB’s credit quality would benefit from the support of its new majority shareholder,” Moody’s said.

If the privatization and recapitalization are successful, new equity capital will support UCPB’s growth and maintain its minimum Tier 1 capital ratio above a 10 percent requirement that includes a capital conservation buffer required for all Philippine banks, the credit rater said.

In contrast to the government, UCPB’s eventual new majority shareholder likely will view the bank as a strategic addition to its domestic operations, it said.

“Therefore, we expect that the new shareholder will support UCPB, a credit positive for UCPB’s depositors and
creditors,” Moody’s said.

It also expects the terms of the recapitalization plan by first-quarter 2018, shortly after the government and the bank restart the planning work that was done during the last privatization attempt.

Dominguez had said that the recapitalization program for UCPB should be pursued quickly because the government does not intend to extend the financial assistance for the bank beyond the expiration of the rehabilitation plan at the end of 2018.

In response, UCPB said it is looking forward to its privatization as it will definitely redound to the benefit of the bank and its clients as this will strengthen its capital and generate more resources to improve its competitive position in the market.